Ladies and gentlemen, good day, and welcome to Control Print Limited Q2 FY 2025 Results Conference Call, hosted by Asian Market Securities Limited. This conference may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
Actual results may differ from such expectations, projections, et cetera, whether expressed or implied. Participants are requested to exercise caution while referring to such statements and remarks. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bhatia from Asian Market Securities Limited. Thank you, and over to you, sir.
Thanks, Tanaya. A very warm afternoon to all. We welcome to the Control Print Limited Q2 FY25 earnings conference call, hosted by Asian Market Securities Limited. From the management side, we have Mr. Shiva Kabra, Joint Managing Director, and Jaideep Barve, CFO. Now I hand over this call to Jaideep for his opening remarks. After that, we shall open the floor for Q&A. Thanks, and over to you.
Hello. Yeah, good evening, everybody. My name is Jaideep Barve, and I am the Chief Financial Officer of Control Print Limited. Welcome, everybody, to the earnings conference call for the first half of the financial year 2024 , 2025 of Control Print Limited. We appreciate that you have taken out time from your busy schedule to attend this call. With the festival season around, I take this opportunity to wish you and your families a happy Diwali.
Mr. Shiva Kabra, the Joint Managing Director of Control Print, also joins me on this call. For the first timers who are joining us on this call, more information about our company can be obtained by visiting our website. For your information, the detailed presentation has already been put up on the website, as well as in the investor presentation notification on both the exchanges for this call.
Let me now provide you some highlights of the performance of CPL for the first half of financial year 2024-2025 on a standalone basis. Revenues from operations. On a standalone basis, the total income for H1 is approximately INR 185 crores.
This is a good growth from approximately INR 165 crores in the first half of the previous financial year. Just for information, for financial year 2023-2024 and financial year 2023, the total income was INR 347 crores and INR 295 crores respectively. Pipes, food, cable and wire, dairy, steel and metal and wood remain our top-
Sorry to interrupt. The line to the management has been dropped. Please stay connected. We have now the management line with us.
Yeah, hi. Sorry for this technological glitch, but I'll continue with my speech. Regarding the expenses and profitability levels, the cost of goods sold has remained steady at around 40% of sales in the H1. Management remains committed to optimize the procurement costs and also look closely into the economy, efficiency, and effectiveness of operations. This, we feel, can definitely lead to reduction in the operating costs going forward.
Employee costs have marginally increased due to a proposed employee incentive program. Depreciation, manufacturing costs, and other expenses are incurred in line with the business needs. The EBITDA, PBT, PAT and EPS, excluding exception, items, grew by 7.3%, 11.6%, 15.5%, and 70.5% on a YoY basis.
The way forward is for coding and marking, the change sales strategy to focus on bigger and key accounts should result in both the jump as well as having a good quality of revenue. We would have a better penetration into the track and trace segments. We have some good strong orders in the pipeline. Global footprints will be increased by focused management of overseas subsidiaries and installed base will increase, focusing on increasing our larger market share. The floor is now open for questions.
... Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking the question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Karan Bhatia from Asian Market Securities Limited. Please go ahead, sir.
Yeah, personally, mix across printer consumables, spares, and others for this quarter.
Sir, please, can you repeat your question?
Yeah. Am I audible now?
Yes, sir.
Yeah, Jaideep, this is with respect to the number of printers sold in this quarter.
Yeah. So you want the number of printers which are sold in the quarter, right?
Yes. Yes.
Well, we sold 681 printers in this quarter. 681 .
Eight one. Right.
Yeah.
Also, can you share the revenue mix between printers, consumables, spares, and others?
Well, for this quarter, the breakup between printers, consumables, spares, and service income is approximately 13%, 64%, 7%, and 15% respectively.
13 is for printers, consumables is 64.
64 yeah.
Right.
7% is for spares, and 15% is towards the service income.
Right. Thank you. That is from my end.
Yeah. Thanks, Karan.
Thank you so much. The next question is from the line of Aman, who is an individual investor. Please go ahead, sir.
Sir, am I audible?
Yes.
Yeah, you are.
I just wanted... basically, I'm new to the business, and, I just wanted to know that, what are our internal growth projections for all the acquired companies like Markprint, Codeology, CP Italia, and a JV with V-Shapes? So, like, it is in line with the overall Control Print growth of, as you mentioned in previous call, of 10-12% or higher side. Do we acquire for higher inorganic growth of the company? And the second question is, I just wanted to know the average pricing of our single printer.
Yeah, Shiva, you want to take this question?
Yeah, definitely. Thank you, Aman. So in general, our industry growth is anywhere between, you know, 10-12%, and that's more for the standalone coding and marking growth. Whatever acquisitions we've made, that's obviously to increase the longer term organic growth of the company. So, one acquisition was quite strategic in nature, which is, you know, our own subsidiary, CP Italy, in which we purchased V-Shapes. So that's an entry into a new line of business, which is in the, in the packaging sector.
Then, one thing which we developed, also through a sort of purchase, but more of a, where a team sort of came over and, you know, the whole thing happened was for our track and trace business, which is under the Curious Codes brand. So I think you can see more information on our website about that. And what we're doing in the core of Control Print is the coding and marking and the digital printing business.
So, that's under the Control Print brand. So I think if you see it, we have basically essentially been focusing on expanding our organic sales growth capability by looking at some acquisitions to improve, A, the technology coverage, and B, to improve some geographical coverage. So if you look at, like I said, track and trace and, you know, of course, the investments in digital printing and getting into the packaging machinery business is more on the technology side.
And then certain other things where we made certain investments, that is for filling some holes in our product range, which is in Codeology and Markprint, and also for the geographical expansion. So it's to increase our organic growth rate for the, you know, at least the medium term.
Okay. Okay. One more question, sir. Exactly 64%, as you mentioned, the consumables. So may I know what is the exactly consumables, or what is, actually the consumable part?
Yeah. So normally it's inks. You know, that's so. A printer will use ink, like, you know, how you have an inkjet printer, it will use ink. So even our printers are industrial inkjet printers, and the main consumable is ink. Of course, in some printers, the cart- inks are in the form of cartridges. There are also some solvents associated with the inks. There are ribbons in some cases, you know, in certain cases.
So that would be the consumables. And there's also service and spares and filters of business, which is another type of repeat, but it's not a consumable per se, it's more of a, we call it, I think, under spares business. It's under the spares and service business. So that would be a recurring part of our revenue, part of our business, both of these.
So, major part is basically the consumable which printers use?
Yeah, the consumables is the largest sector of our revenue. Then the second biggest sector—or about equal, I don't know exactly, Jaideep, but as the numbers would be the service and filters-
Correct.
and parts business.
Yeah.
The printer business would be about the same size as the service parts and filters business.
So for this quarter, it is 13, 64, seven and 15 between printers, consumables, spares and service.
Okay. Okay.
Yeah.
Okay.
You, Sir, you didn't mention the pricing or one thing, the average pricing of the printer.
Yes, so we've got a range of printers, so there's no single printer that we sell. So unless you tell me which printer, exact model you're talking about, it's impossible to know. But our printers go from about INR 95,000 all the way to, like, you know, close to INR 40 lakhs or even further than that.
Okay.
So it depends on which printer. I cannot say offhand because there are so many different models that we have, depending on the need of the customer, you know?
Okay. Okay. Thank you. Thank you, sir. That's all the time.
Thank you very much. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Naisar Parikh from Native Capital. Please go ahead.
Yeah. Hi, am I audible?
Yeah, you are.
Hi. Hi, Shiva here. You know, just two questions. One is that, this quarter seem to be low at-
You are cutting. If you could just repeat yourself again, at least to me, you're cutting.
Sorry. Is it better?
Yes.
Yeah. My question was the new printer sales seem to be low in terms of YOY as well as, you know, volume and even percentage sold. So if you were still to come into this or, you know, how soon is that? And secondly, that over the OpEx costs employment costs, that's obviously for the-
Sorry to interrupt, sir. Can you please speak a little clearer and louder? Your voice is not clear.
Sorry, is this better?
Yes.
Hello.
Yes.
Yeah. Could you get my first question, Jaideep?
So I got both your questions. I think the first question you raised was the number of printers sold, and that it's lower than, the past trajectory and whether that's signaling a slowdown in the business is correct, or is there-
Yeah.
a pickup that's expected. Is this correct?
Yeah. Yes, correct.
Approximately something of the sort. So, you know, like I said, we've changed our sales strategy quite significantly, and we've cut out a lot of the smaller customers because we, you know, in the end, our business of service, the biggest and best customers.
Okay.
And you can say it could be like a charger or overall, we said, you know, in the end, we don't want to be in the four-star range of hotels, you know, we only want to be in the five-star super deluxe category. So in the beginning, it had some minor effects on the sales numbers, but if you look at it, after those numbers, they've, you know, the overall sales is still growing because the quality of the sale has improved, you know.
So the amount of aftermarket business we're getting for printer and the life of the printer, you know, in terms of operation has increased because in general, Marico would, just to take a name, would, you know, if they buy a printer, they're going to use it for the next eight, 10,12 years, you know?
Whereas a small company, they might be successful, they might not be successful, they might shut it down, anything might happen. So maybe the life of those printers is less, it may be three, four, five years. And obviously, Marico would produce more, you know, whatever type of Parachute or whatever, through that line. As an example, I'm not talking about a specific customer again, but there is a smaller company would also produce less, you know, less bottles of coconut oil through that line.
So as a result, the amount of business we would get from a printer, Marico, for example, would be, you know, to be averaged two to three times than we would get from a small customer, and it would also be two to three times longer in terms of duration that the printer would be used.
So, you know, when you look at it from that angle, obviously, that's sort of where we shifted our focus. Rather than affecting our sales number, it's slightly affecting it, but more than anything, what I think is it's caused a certain amount of lumpiness in the sales. So I think the sales pipeline is still strong, and I still expect that we could sell the same number of printers as what we did in the past.
They will be of better quality, but, you know, not right now, I cannot say that it's going to be the same level of quality. But I think that, so again, let's just say I think that we're going to sell as many printers as before with a significantly higher level of quality. But I'm quite sure what we will not do is, you know, reduce aftermarket business, because groups in the way are selling the higher quality than before on average.
Okay. But shouldn't that reflect in some way? Because we've been talking about this for, like, over a year now. So shouldn't that reflect in some way, either in terms of higher consumable sales or, you know, higher average selling price per printer? You know, volume could be low, but there should be... If we are selling better quality printers, shouldn't that reflect in revenue or in consumable if we are selling to a bigger client?
Look at it, our average consumable business for printers increased, and that's driving the sales forward. So, I don't know if you, that number there in the presentation, I would like to see it, but the average business per printer, the average ID of business per printer has increased, and that is what is driving our sales. Of course, if you look at it, the strategies that we've looked at for a year and a half, so it's still taking place, you know. There are, like, 100 sales guys, you know, that we have.
There's, like, trade and service people. It takes time, and you want to believe in, you know, what the management says sometimes and get it implemented down the line. But from what we see is that the quality of sale has improved, and that's why the business per printer has improved. And that's obviously because the marginal sales in the last year to year and a half have been better, and that's what's driving the business, continued business growth. The second part was about the operating expenses.
So I think, you know, that's the second question that you wanted to put through, if I'm correct, and you also mentioned something maybe for the employee cost. So I think what's happening is that we've got some new business that we've invested in, like the track and trace, you know, the packaging machinery business and other things, even in India. And we've not really gotten the numbers from that as yet, in some parts, what digital printing.
So it's not really contributing to the revenue right now, and I expect that it will significantly in the very near future, because we have some projects even as we talk which we are yet to implement or, or rather execute completely, because till we don't sign off on it, we cannot start billing. So I think there is some revenue from the track and trace. There's very little revenue from the packaging.
And so what part of the operating expenses that are there, are there from the non-coding and marking businesses? Because in the coding and marking, we're very conscious about how much money we are spending.
If I give a pure breakup and I broke out, you know, each bit, if I took track and trace as a separate division and I took packaging as a separate division, and I took coding and marking as a separate division, and I took our investments in the digital printing, R&D and stuff like that, and then if I break it up into four separate businesses, one is coding and marking, one is all of the digital printing part, and the innovations that we're doing there.
One is a, you know, a track and trace business, and, you know, separate P&L for that, and the last would be a packaging machinery business. You'll see that three businesses will be running into a loss or be sucking up resources, and one business would have, you know, the coding, marking business profitably will further increase.
But obviously, we're getting the consolidated statement. I am not making any excuses here because in the end, you know, it's our. It you know, it is my decision, you know, and the company's decision that we want to pursue these opportunities. But there is an investment period, you know, before, sometimes in these cases, before we can see a return.
Fair. But what would be the investment or what would be the loss from the track and trace and packaging business in this quarter or half year, if you can give that number?
I don't have those numbers offhand because we ourselves have not separated out completely. But I would, I would say, like, it would be in the order of a few crores.
But, okay. Well, if you give some of that numbers-
But obviously, we have a certain number of sales people, employees, costs, and it will be at least a few crores of whatever towards that. So some of the OpEx that you're seeing, both in terms of other expenses and in terms of employee costs, is related to these other businesses. It's, you know, I would say, like, the coding and marking cost has not increased that significantly or lesser than what the revenue increase has been.
So if you look at the delta on that, that business, to me, from what I know, is more profitable. But, I mean, the thing is, I've not put it out in the investor presentation, so now I'm a little bit reluctant to talk about it exactly. So I'll. You know, that's something I, I'll have to discuss with JD, because, you know, we can put it out next quarter or do something like that, maybe at the end of the year. Some of these businesses are also more lumpy in the packaging side and the track and trace, because these are, you know, where you get.
You can get projects which are significantly higher in terms of billing, but, you know, it, till you don't ship out and you don't bill them, obviously, for someone like us, we would not consider that as a revenue till the day, you know, the project is signed off, the customer has accepted it and accepted to, you know, pay us. So there's some lumpiness to those revenues. I want to be straightforward, till we don't increase the size of that business to the extent that the lumpiness reduces.
Okay, so if we look at it, right, we're growing at a gross profit level or, at somewhere around 20% plus, but the EBITDA is down to flat, right? So just going forward, do we think that from a loss perspective of the other business investment, that, you know, it is not going to go beyond it and we'll start seeing some revenue push? Or do we think that there is still some time or some more loss that needs to be incurred there? How should we just think about it? Because revenue is up 17%, and then, EBITDA is down. So how should we think about the next-
Yeah, so I think that on the standalone part. So what I was talking about was on the standalone part. So yes, if you lose, also, if you go, if you look on the consolidated side, you'll see that there's a significant negative as compared to the standalone.
So again, the standalone profit has increased, but even in the standalone, which is, you know, Control Print in India, there is a substantial set of other expenses that we've incurred in these other businesses within our own the areas directly being looked at by, you know, the mothership company. And if you look at the subsidiaries and you add that up, because obviously we're investing. So right now, you know, I can only say that we are in the investment phase. I had-...
said in the previous con call that I, like, I'm looking at two full years before the strategy is executed, and we're working on all sides, because in the end, we are not here to, you know, I mean, I'm not here to nickel and dime this, you know?
In the end, like, my objective was very straightforward, because like I've said, is that to increase the long-term growth rate of the company, and we have the types of products and, you know, solutions and the technology, with, you know, patents and everything else that's protecting us, to do that in the medium to long term. So if that means that we have to be...
You know, obviously, in the meantime, we still want to optimize our business in the current thing, but, you know, I, I'm not, of course, I don't really make predictions in any of the con calls from the past, obviously, you would know. But-
Yeah.
Again, like I said, it's going to take a two-year period, and it's very difficult for me to look in the future, but I'm not, like, if someone has asked me overall, I would say, like, the first six months of this year has not been bad at all. You know, it's not out of line from what I was expecting.
All right. And what would be the revenue for track and trace now? Is it getting meaningful? Are you seeing a good pipeline, and same for packaging, if you can give some flavor in terms of-
There are some projects also; they need to be executed. Till then, we cannot book the revenues, but it's definitely looking better than what it was last year. I think our solution is more mature also and, you know, as a result, you know how it is to get that first customer or two is more difficult. Once you do tha t, then it's easier to get the next set of customers, and so on and so forth.
So it's looking better, and the pipeline is also better. So I think, again, because these are smaller businesses, I would look at it on a year-on-year basis and, you know, whereas coding and marking is many, many small printers, you can have, you know, comparison on a quarter-to-quarter basis, and there for a long time.
Some of these other projects, like, whatever revenue we do, I would look at it over a yearly period and, you know, on a compared to the previous year or the, you know, trading 12-month basis to the previous trading 12 months, because there's a lot of lumpiness to these things. If I sell three packaging machines, that's going to be, like, INR 12 crores-INR 14 crores, but that doesn't mean I did it today, because if I get an order today, it's going to take me six months to execute it, you know, because the customer has to come, he should take the Factory Acceptance Test.
I have to do all the sampling and other type of things for him. Everything is to be approved piece by piece by piece, because I don't want to send a product which doesn't work properly. Neither do I want the customer to have an issue because, you know, he did, like, a power to the machine and, you know, then he had some problem because the barrier property to something else was not exactly what he was looking for, for example. So, so there are some more different subtleties to these businesses and, you know, it's, it's a bit more project like type execution.
Right. All right. Okay. Thanks a lot, Shiva. Thank you. All the best.
Thank you. Thank you.
Thank you very much. Our next question is from the line of Rishi Modi from Marcellus Investment Managers. Please go ahead.
Yeah. Hi, Shiva. Can you elaborate on the new employee incentive program which you referred to in your opening remarks? What is this about?
I didn't get it exactly. Jaideep, did you understand?
Yeah, he just asked about some employee costs, which have gone up. I think you mentioned the same thing, right? About the employee costs.
Yes, yes. So the employee incentive program you referred to that in your opening remarks.
Yeah, this is an internal management, you know, like, decision what we've taken, you know, to make sure that we hire, we retain the best talent and make sure that the rewards and recognition go hand in hand. So that's the internal management decision what we've done, so that's why the costs have gone up.
Okay. Got it.
Yeah.
About this new sales strategy that you implemented last year, so by when do you expect it to, let's say, start paying off in terms of printer volumes that we sell? So, like, we have been saying since two, three quarters that the pipeline is good and you're hoping to convert, but, you know, it isn't happening. So any, like, reflections on the change that we made last year?
So I think that, like I said, Rishi, I think, you know, our own expectation is that even if we sell the same number of printers as what we were before, that we will get a significantly higher business per printer, and, you know, that's what our focus is. Right now, we are a bit lower on printer sales, you know, in all honesty, than what we should be.
Again, like I said, because the pipeline is good, I cannot predict, but I, I would expect that we would do on average the same number of printers as what we've been doing in the last couple of years, besides this, before, even before this. But because the quality of the printers is better, I think in the long term, it will help us give a stronger long-term revenue growth.
So are we still expecting to do well on that front? We're still expecting that the first half can be improved upon, if you get what I'm saying, and we would still be at that 27-800 printer mark at the end of the year, which is normally what it is. If I'm right, that's what we're about to.
Okay. Okay.
But of a better quality, so.
Right. Right. Got it. And, finally, so, if I look at your standalone balance sheet, the inventory has gone up significantly by around INR 10 odd crores. So, like, what's the reason for that?
... Yeah, so the main thing is, these are some COVID level commitments that we had from the past, and we just executed, you know, as per what our commitment was. So we should see some benefits on that side, as it comes down. One, two things are slight increases are there, because one, two products that we put more on the digital printing, that we're doing some more R&D, we are also selling those products.
So that's caused some minor increases, but some part of it is a commitment that we made in the past. So I think by March, we should see some reduction on that. Maybe not to the level where it was in March 2024, but definitely, less than what it is in September. Jaideep, you want to please give your own?
Yeah. So, Shiva rightly said, you know, like, some of the critical components, you know, the electrical components, we had made, you know, like, orders with our suppliers, and as a result, you know, the supplies have happened now. But we've got a stronger pipeline in hand, so the consumption will happen soon.
And, as you would be aware about our business, you know, like, we do tend to keep a certain amount of inventory for the spare parts, because, you know, like, we got some generations of printers going on at our customers' premises. So we need to, you know, like, make sure that, you know, like, they need to be serviced, they need to be replaced, as a result of that.
But yeah, we are monitoring the situation very closely and as of Q1, it was about 88, and now it is about 97, but we'll definitely bring down to that Q1 level of 88 or maybe to 85 as well so we are monitoring the situation very closely.
Okay. And by commitment, you mean that you had committed to buy some minimum quantity, that-
So, you know, like, we have some economies of scale actually with that, like, you know, the buying costs obviously get reduced by, you know, certain amount of committed quantities.
Fine. So, if I look at the difference between your consolidated PAT and standalone PAT, so that's around close to three crores.
Yeah.
In Q1, that was around INR 4.6 crores, so it has, like, reduced sequentially. So, do you, like, expect it to remain at this three odd crores level, or, how should we think about this? Yeah, Rishi, I think we should. Oh, question also below. You know, obviously, we're still in the investment phase, so, you know, it's gonna take us about two years to get a very clear picture of whether we are successful or not.
Like I said, from my own perspective, I think I'm happy with the way the first six months have gone of this year. So I don't think we are out of strategy, but, you know, to give predictions about the future is, like, not really what we do.
And like I said, there's also a lot of lumpiness of revenue, so even whether we do well in one quarter, we do poorly in one quarters, very difficult to make out, because primarily what's there abroad, a huge part of it, the packaging business, so that is by inherently lumpy. Then even what Markprint does is digital printing.
Now, again, in both cases, you know, we only count the revenue when we actually ship the equipment and we get the money in. So even if I have some projects, but these projects are more complex, sometimes they can take months to execute. So, you know, very difficult to make out, whether it's a plus or it's a minus.
So what I do believe is that, you know, I agree, we've not given the exact breakup of our Coding and Marking business versus the digital printing, the Track and Trace and the packaging in India in the standalone. And if you look at the Coding and Marking business, is still growing and still driving the profitability for everything. And that's why the standalone business has increased, even though there's a lot of costs in the other three businesses, which according would be negative as of right now.
But, I mean, it's very difficult to see where things are in the future. But I think, you know, we'll get a very clear picture because we've got, like, a sort of two-year roadmap in how we implementing this entire strategy.
And going to, like, a long-term path of, you know, profitability in this business, because we believe that the all three businesses have a, you know, a fairly big opportunity size as compared to the Coding and Marking business.
So this could be, you know, an opportunity for Control Print to really go to something which, you know, where we can be in a much bigger addressable market, and therefore we can, you know, sustain that type of strong organic growth for years to come. So, like I said, there's no... I'm not here to try and, you know, look at quarterly or short-term results out here.
You know, for me, the focus is to really focus on where the strategy is going over the next two, three years, and we believe that this will be the best for not only the company, but you know, for our shareholders, the customers, for our own team, and also for our shareholders in the longer term, you know, and that's sort of where we are thinking.
Again, like, I can't give any predictions. I think that the two important things to look at are the sales growth overall and the standalone profitability, and maybe in the end of the year, in the results we give in March, we'll give a breakup of the different businesses. There's the coding and marking, and then the other businesses combined. That'll give a better picture to everyone.
So I think those will be, like, the key factors, you know, what is the profit, the coding and marking business, you know, because that's what the company is today. And then whether the sales growth is happening in the other businesses, because we are not here to try to force an early profitability. We want to, you know, we want to scale up these businesses. So in the end, what we would look at now is that is the sales growth happening, you know, and is that on target?
Okay, got it. Thank you.
Thank you very much. Our next question is from the line of Saket Kapoor from Kapoor Company. Please go ahead.
Namaskar, Shiva and Jaideep, sir, and thank you for, firstly, for this opportunity. Sir, as you very well articulated and mentioned that we are in this nascent stage of growing these verticals where we have invested in the overseas entities. So only my suggestion point as an investor and as a long-term investor are: number one, so when we are mentioning our current structure under the slide which is being uploaded, we should also provide the numerical, that is, the value of our investment along the subsidiaries. We have mentioned about Markprint acquisition and the stake being increased twice.
So that we there also, if we could mention how much we have invested, so investors will get an understanding what has been the breakup of the investment from the slide itself. Point number two, Shiva sir, as you very well mentioned that you are not here with the job of predicting what’s going to be or guess what, but sir, you are working with a business plan, and so on a half-yearly basis, at least provide us with an input of what you have thought and how things are shaping up, and also for H2 in terms of these investments, what are the steps that are in the annual that may or may not result in a probability?
But we as investors must be knowing exactly what your line of action being. Since you very well mentioned the first point, that you are yourself satisfied with the progress which we have made and the way things are going up. But people in the investing community are not getting that same color or things in the numbers, and that will take time. So my first humble suggestion is that we investors must be also in the same loop where your thought process is, and we are there to support you on the basis of that. So kindly look into or deliberate on what I've spoken. So now coming to the second point.
Sir, am I audible, sir, clearly to you?
Yeah, you're audible.
Yeah, yeah. Fine, sir.
Because there was total silence, so. So now coming to the numbers which we have re-reported, and I'm now concentrating on the first half itself, not going for the Q1, Q2 numbers. So, Jaideep, you were mentioning about the employee cost being higher because of some one-time incentives. Or if you could just give a color on this INR 31 crore- INR 44.4 crore increase, that is around INR 13 crore increase in the employee benefits. What is the exceptional part of it, and what should be the ballpark number for H2 going in?
Sure. So, part, question number one, what you said is that to give the investment amounts in the subsidiary.
Yes. Yes, yes.
Yeah. So going forward, like from Q3 onwards, like of this year, we would definitely, you know, like, give you information about the amounts, what CPL has invested in this, in the foreign-
Yes.
In the industry. We'll definitely give.
Yes.
Yeah, and I think Shiva has always, you know, like-
Yes, yes.
- Yeah, yeah, yeah.
Yeah, he's already committed on, you know, like, how he actually sees the business going ahead and, you know, like, what kind of, you know, like, investments we want to do and make sure, you know, we support them. So at the moment, it is very, you know, like, very early. We've just made these investments early this year. I think in March 2024 , we made an investment in the Italian company, where we bought out the assets of V-Shapes. And February 2024, we made the investment in the UK company, which is Codeology Incorporated. So at the moment, they are still in the investment stage.
But one thing is there, that Markprint, which we had acquired, you know, like way back in 2022, now we are working on with the business plan for them, and we are supporting them with any every initiative what they're taking. And in the current quarter, they have turned positive. In fact, they have shown a good net profit. So at least the things are looking well for Markprint and Codeology and V-Shapes investment, which is CPL. They are still in the nascent stage, so we would be definitely supporting them and make sure that they do become a self-sufficient unit in the near future and produce the results.
I'll just give my INR 2 cents. So you see, what happens is out here, the amount we're investing in relationship to Control Print size and profitability is not very high, in all honesty. It seems higher, and of course, everyone wants that, you know, when the results are not looking that good in the short term, and I can understand, you know, even I might not like it as an investor, but at the end of the day, you know, we need to grow this business.
Now, every business can go through a different phase, and every person can have a different view. Like today, it could be that suppose you have India Mart International. I'm not here to talk for any other company or something, you know? Please, don't take this in the wrong way. Some people might view it that they have to maximize their profitability and they're paying customers or something. Some person might say that, "Hey, you know what?
The opportunity is to become big like a Alibaba, and they, they should be reinvesting the money, in fact, raising more money from the market. You know, even if it means some minor equity dilution at a high rate and growing the business, because this is the time to create a huge company, you know? So there can be, you know, multiple views of a different strategy. For us, we are going in three markets. To be honest, that we are, we have a very good idea about, but we need to understand the exact business model and specifics, because we know that the opportunity is very large in all of these businesses.
As we go into specific projects, what we're doing is we are fine-tuning our business model and we know where exactly we want to operate, what is going to give us the short-term results, where do we want to work in the medium term and the long term, so the coding and marking business is a mature business model for us because we have an idea of what we want to do. We know the market quite well, and we've been working in this business for 35 years or something like that. In the other spaces, you know, we are adjacent to those markets, so we know those markets well from a technical angle or certain parts of it.
But when you're actually in that business and you're going through the dynamics of the business, and especially like I said, whether we look at the packaging machinery or the market, you know, these are products, especially in digital printing and you know, definitely more on the packaging machine, which we're still working a lot on developing certain products and investing on that side, and even investing on the digital printing on our own side. So as a result, like I said, I'm not here to... You know, I don't want to give some sort of a guidance which, you know, is incorrect or is leading an investor on.
I don't want to say that, you know, this is gonna be a thousand crores or this is gonna be ten, ten crores or something, because, you know, I myself, I'm still optimizing my own idea of how we need to react and work in each of these businesses. Definitely, we have a business plan, but, you know, I, I, right now, these things are still more fluid and there's still more change than what happens in the coding and marking business.
Because when we made a change like that in the coding and marking business, which was a big change, which was, you know, this is the focus, these are the customers, this is how we're going to work, we had a very definite idea of that business, you know? We knew what we were doing. So even the market view that we are losing a big market, which is, you know, all the C&D customers and so on, we feel that that's not a very high risk move because we know what we're doing.
Out here, you know, I wanna be very clear that we have a good idea of what we wanna do in the short to medium term, but we still need to keep optimizing and keep understanding where we need to invest in, what we need to expand, and we're still building out our own teams and our strategies for certain things. What we know is that if the products are appealing to the customer and they're resolving the customer's needs, then... and we have, you know, obviously a protective moat around whatever we are selling.
It's a very simple thing in the end, and we need customers, you know, we need, we need products specific to resolving specific customer issues, and at the end of the day, whatever product we sell, there should be, you know, some sort of a ring around it, so that it's not easy for someone else to deliver the same type of solution that Control Print will deliver, and, you know, that's what our focus is, and we know that we are working well towards that.
If there was a problem, I will definitely flag it out, but it's very difficult for me to give a prediction of what exactly, you know, we expect the business to be and what's happening. Right now, our focus is on maximizing the long-term growth, and we feel that the opportunity in all three businesses, definitely the packaging machinery and materials, but also the track and trace and the digital printing is quite a big scope. And even what Control Print address itself is a big scope, maybe more than the coding and marking business.
So, you know, like I said, for this, this was a project for us to get something that Control Print can grow at a high double digit type of a, you know, maybe in where we said, like, our own coding and marking business is growing at, you know, 10%-12%. So then, if we're doing well in the short to medium term, in the end, we are constrained by the 10%-12% growth.
So we need to do some other things too, so that we could say, "Hey, can we grow at 20% or 15% or 25% over the long period, over the next ten years?" And, you know, this is more of a thought to go in that direction. And I think, you know, as a long-term shareholder, you'll appreciate that, you know, doing that type of business with strong margins and an operating leverage will also be better for our own long-term shareholders, even though, you know, of course, in the short term, you know, it might not reflect that well.
But like I said, I will try and you know, speak to Jaideep, and he'll try to give some sort of a break-up on the standalone basis of the Coding and Marking business versus the other businesses, so people have an idea of what the core business is doing, and then how much we're investing in the other businesses on both an investment basis and an ongoing basis.
Like I said, you know, obviously, in the end, it all comes down to a certain level of trust in the management, because we also don't want to waste our own money. You know, if you're doing it, obviously, we are convinced that it's something we can do successfully. You know, of course, like I said, only time can tell whether you're gonna do successfully.
Successfully can be defined in many ways, but how to define it in terms of numbers is something different. Like I said, for me, the success is that if I'm, if we're growing at, let's say, 12%, 10%, 12%, whatever it was, in the long term, if we could grow at a higher percentage in the short term, then, are these, are these like, you know, measures taking our growth rate up significantly to maybe 15%-30%, you know, in that range over a 10-year period, you know?
And if that's something that's sustainable, then, you know, that's without losing the core operating leverage and profitability in the margins. Then I think then it's a successful business. So it's gonna take some time because, you know, it's even, you know, the Control Print business took a long time before we created that base. We had that thing, and then we went to a mode where we were focused more on profitability rather than just growing. So-
Sir, I totally, yes. Sir, I agree with you about whatever you have spoken in length now. So only two small points, sir. Firstly, sir, if you could, as you mentioned right now, you with the discussion with the CFO and the board, if during the next results or maybe the annual results, I think so, a well-documented narrative from your side or from sir, in the encrypted way that is just narrated out, in proper documented word, would give a better understanding of what you are trying to explain to us, which is very well understood. And, sir, firstly, I missed your point about our core business sentiment part.
We are also witnessing a lot of consumer companies who are our customers, are feeling the pain in terms of the volume growth. However, inflation has subsided to some extent across the board, taking into account this the vagaries of the seasonal vagaries. But, what is your understanding? What is the feedback from your customer, from our mother business, in terms the consumer demand and the consumer sentiment?
And how, what, I think the 400 CR was our board guideline to achieve, in terms of top line, in two years, that is, that March 2024. We are, I think, so on path of achieving that, but if you could give some more color and spend some time on giving your thought process on how the business sentiments are.
So it's difficult for me to give the sentiments. What we've seen is that, you know, the, our own business is going stably in the Coding and Marking business. I'm talking about specifically. I just wanna emphasize. What has happened is that for some reason, the pipeline is good in terms of new printer sales, but they're taking a bit more time to close. Now, I don't know if it's because the market is slowing. The customers are not saying that any project is dropped or factories are there.
So it just seems to be a little bit slower, which I think, you know, somebody has asked this question earlier about the new printer sales being a bit down. So again, it could be partly for a change of strategy. We're not changing our strategy. We're still expecting to sell the same amount as what we did in previous years, which means we have to have a stronger second half in the coding and marking business. But again, we did expect maybe that we would sell about at least 150-200 printers more in the first half than what we have.
We'll be expecting to make up in the second half, but I don't know if it's because of the market or, you know, I don't. You know, no, like, big slowdown being, you know, said by any of our customer or anything. But, yeah, it's not, it's just a little bit slow in terms of new printer sales. That's what I would say. But other than that, the people who have the printers are using the printers and, you know, that seems to be fine.
But it's just a slight slowdown in new printer projects getting concluded and going live. And obviously, you have to understand our printer is a very small part of the project, so, you know, obviously this is when people are sitting on new factories, brownfield expansions, revamping some of their existing factories or lines. You know, first they order the line, they do everything, then we're the last people to go. So it could be some slight slowdown there, but I wouldn't know. I really wouldn't know.
But as... I'm sorry to take much of your time, but our consumable demand is dependent, is directly proportionate to the utilization level. So as you have already mentioned many times that it is on the lines on which the printers are being installed and at what pace the production goes, that depends, that is directly related to the consumable getting replenished at a considerable pace. So taking that into account, what is the thought or what is the understanding in terms of the consumable replenishment from the customers whom we are servicing?
Yes, I think I mentioned earlier that the consumer business has been the sales growth driver for us so far, this first half of the year. But now again, I don't know if it's because the sales quality of sale has been better over the last year and a half, and that's why the per printer consumables has increased, which means people are printing more from each printer, which could also be, in our specific case, not related to the market, but related to the fact that our overall quality of installation has improved a bit. So it could be that, but again, like, I don't know offhand.
But people who have the printers definitely seem to be using them. For some reason, the new printer pipelines seem to be... Nobody dropping it. It's not like we're losing that many cases or anything. It just seems to be that the pipeline is, you know, taking a little bit more time to move ahead. So it could be, you know, we think. I think it's probably because we are moving more towards larger customers, and therefore, the pipeline is being a bit fast, a bit slower to, you know, move through and conclude, because larger customers have, you know, a high degree of sign-offs.
So I would again not know, you know, but yeah, the people who have the printers seem to definitely be using them, but the new printer sales is, the pipeline seems to be a bit slower. So like I said, I don't know what that's supposed to mean, but we're still expecting to make up in the second half of the year. Like I said, we are still about 17% on market share in the overall market and about 21% amongst the Big Four. So we can still make up even through market share gains, even if printer sales or the overall market growth is slightly slower.
Right. And Jaideep said your comment, last comment on the employee benefit part, what is one-off here or, on a quarterly basis, what should be the standalone numbers we should work on? This quarter, it was INR 23 crore.
So what happens is that we normally have about 17% or 18% of the revenue as our employee costs. So this particular quarter, we made a provision because, internally, management has taken a decision, you know, like to make sure that critical employees or the high performers or senior employees who contribute to the company's growth and who have stayed loyal to us, we need to recognize them. So it's still internal management decision.
Overall, by the end of the year, it should just, you know, streamline, because with the increase in the revenue, the ratios would definitely be on the same line. So we would, you know, like, look up to probably about 18% or 19% of our... Or 18%, 17%, 18% of our sales as the employee costs for the year-end figures.
Correct. Correct, sir.
Yeah.
Right, and for the other expenses, I think that you did allude to it there as part of it.
Yeah. What we do is, you know, it's more or less, you know, like, as per the needs of the business. So there might be, you know, like, some quarters where it might be higher as compared to the sales, but we are normally, you know, like, our normal ratio is about 13% of the total sales. So we would stick to the same levels for the year end, pending thirty-first of March, very well.
Correct, sir, and sir, can you give me our annual profit number for the last three years, and the total investment that has gone into these subsidiaries? Do you have them handy as well, Shiva?
So, Saket, what I can do is that, you know, like, we can maybe connect later, and then I would have you. I will send over the email to you.
No, the total investment number you have, sir, how much till now, till date we have invested in these subsidiaries, Markprint, Codeology and the V-Shapes?
The total investment is about INR 75 crores.
Okay, so here, Shiva, sir, I beg to disagree. INR 75 crore is our last year net profit PBT number. So that's a substantial amount investment that has gone through. I mean, you were mentioning that-
This is investment in equity as well as provision of loans.
No, no, it is okay. I mean, my only investor... Yeah, yeah.
Saket, I mean, I put on the last on call. You know, like I said, my view is that even if we lose INR 28 crores in our packaging machinery business, that was the budget for them. Luckily, we only lost about INR 8 crores in the first half, so we're doing better than what we expected.
So what I'm saying is that, you know, in the end, this is an investment phase, and I do believe that for the size of Control Print and for our long-term thing, and these are initiatives, you know, I don't, like I said, look at INR 75 crores as I took it in 1 year. I look at this as these are things that we've been investing over for five years, along with the operating costs, along with the operating expenses. We are calculating everything, and we're also calculating what is our top profitability growth.
And honestly, the numbers will look even worse, because even if you look at our standalone business, you know, even in there, we must have lost crores because we are investing even in our standalone business, because the track and trace comes under the standalone business. The digital printing, a lot of the expenses and the investments and the R&D is coming in our standalone business. And even the packaging business, there are a lot of people in India, like not a lot of people, there are a few people in India also, besides Shishir Ukidve, who are also involved in that business, and they are expensive people.
So what I'm saying is that even if I take that out, then, like I said, the coding and marking business profit might increase, but the standalone came down as a result, and when I add the consolidated, came down. But, you know, again, like I said, I'm looking at what is our long-term story out here over the next decade, you know? So that's why, obviously, like, my responsibility and I, you know, I'm well aware. I'm not well aware, but I think, you know, I've obviously got a mandate from the board that, you know, that within this amount of risk or investment, what are the things I can or cannot do?
And obviously, we've got some internal objectives that we shared with the board, and, you know, they are convinced that the plan is viable and should be executed and will create you know value for our customers, you know, for our employees and also, you know, for our shareholders and, you know, in general, for our society.
So, you know, we're doing innovative things, like I said, and all the projects we have are not only for generating significant margins, but you know, also that they have some areas where we have some key technologies and some variations, which means that it's a protectable niche, you know, and it's something that we not only, like, it's a big sales market, but, you know, we also have some competitive advantages and some areas of differentiation, which makes it very difficult.
In some cases, we even have to have outright patents. We have a whole bunch of patents across the track and trace and across the packaging machinery business, where, you know, people will find it difficult to get into the same things or build the same types of solutions as us, so like I said, again, you know,
I think that we've asked for some patience, and like I said, I think what we'll do is we'll give some more, you know, definition on what's there in terms of the division-wise numbers, but in the end, you know, for me, this was part of the plan, and I'm comfortable. You know, I know that we have to invest sometimes to show, and definitely this is one of those cases where I feel that so far.
Yes, sir. Sir, I also second your views as an investor. The only point was that your thought process and your endeavor should be well articulated to your investors also, so that they are also on the same path and the same thought process where you are. And also, there should be a clear narrative to the new set of investors who would be looking at our company as an investable line item. So these are my reasons why I have dwelt on them throughout the call, that there should be that visibility and the endeavor should be there in the mindset of our investors also.
Other than that, sir, we, I second your views that these are investments, and in no way can be treated as losses or otherwise, so we will never be changing our profile, and you will never go into that growth loop, which you are trying to take the company forward. On the sake of repetition also, that should be well articulated and well to your investing communities also.
Otherwise, we will be losing our mojo, what we, which we have the confidence which we have developed over a period of time, sir. And I'm really thankful to you for spending the time and very patiently hearing to me and answering all the questions. Best of luck to the team, sir, and Shubh Diwali to everybody, sir. Thank you.
Oh, absolutely appreciated, Saket. Thank you.
Yeah.
Thank you very much. Our next question is from the line of Saket, who is an individual investor. Please go ahead.
Hi. Am I audible?
Yes.
Yeah, you are.
Yeah. So my first question would be like in certain, you know, industries like diagnostics, you know, companies or equipment providers, they give their, you know, equipments on rent, and then they get a revenue on consumables. So what is our revenue model? Do we outright sell, is it, is it an outright sale model of printers and then consumables follow, or we also give something on that annuity or say, you know, rental kind of a model for our printers?
So we've got different revenue models you rightly picked up, too. So depending on the customer needs and, you know, like, depending upon how the negotiations happen, so either we sell it on outright basis, or we have a lease model or we get on the rentals. So it varies upon customer to customer basis.
What would be the, say, mix between, say, lease versus outright sale?
Saket, this is like a bit of, you know, confidential information we don't-
Yes, fair, fair.
Yeah. Yeah.
Yeah. So coming to the, I think the something that, you know, has been discussed in the last couple of quarters, like we are repurposing or re-relooking at how we are focusing on some of the key accounts. Now, based on how, you know, key accounts are approached, typically, that requires very different kind of orientation, right? You look at solu- it's more like solution selling, you know, technical selling. You look at portfolio, it's also portfolio selling. So, vis-à-vis, say, somebody who is just looking, vis-à-vis, say, a sales profile of a feet on the street guide.
Now, when we repurposed or relooked at our strategy, wherein we are focusing on those key accounts and trying to, you know, land and then expand, so did we hire new people, or we repurposed our existing sales force only to achieve the same objective of expanding or focusing on the key account?
A large part of it is the existing base, because they're already capable of doing it. What happens is, because they're servicing smaller customers, also, like, they get distracted. They've already capable of handling a lot of the larger customers, but now their focus is 100% on that.
More importantly, when we are taking new people in, and we obviously have an attrition level, you know, and there is a turnover that happens, then we are also getting more people with this basic mentality, which is, like you said, more in the solution selling space, more in, you know, representing the company at a different level. I think that that's also... it's a transition that's happening.
But again, what happens with a company like ours, which has existing base, which has installation, you know, these changes, you know, we don't want them to be disruptive. We want them to be revolutionary, but over a long term. So, you know, because in the end, we can't afford a disruption in the short to medium term, because that'll affect our business negatively, but more importantly, it affects the customers' production levels and other types of situations also.
We're very conscious of that. So these are things that, you know, when we are taking it up, it's gonna take, two, you know, one, two, three, four years to optimize it to the 100% max. So I don't think we've optimized this strategy to that level, Saket, but we are working on it, and we're improving upon it. Definitely, as and when attrition happens, as when people are there, you know, new people are there, we are moving more and more towards this new line of thinking.
Okay. Okay. So fair point. Now, given that, you know, based on, I have worked in some similar industries in the past, so, that requires a very strong, you know, human resource division. So has investment been made because training or upgrading their skills, and again, as you also talked about, you know, the solution selling part, and also they now will have to, say, engage with more senior folks, right? And not just retrospective, but they also maybe need to have a view on how the industry is evolving. Something like happens in IT, right?
You need to engage constantly with the C-suite to understand, you know, how are they looking at future investments so that you're not caught unawares. So is that something that you're focused on in strengthening your human resource department or something? If you can share something on that.
... No, absolutely. So we've got a strong human resources department, and we're definitely strengthening that further. We also have a very strong training program. Although what we do is we focus more on internal trainings within the company, which is more technical in nature and sales in nature. And then for a lot of the sales and negotiation skills, other types of things, normally we tend to use outside consultants, where we've got a few good ones. And we tend to use some combination of outside consultants for maybe more of the softer skills.
But we've got an extremely strong hard skill in terms of technical training on all our products for all the people who join. You can see, like within six months, people are able to service printers independently and also understand, you know, all the different aspects of our printer, the technical differences versus competitors, various technologies, the operational costs, and so on and so forth, and confident to answer those questions.
But yes, so we need to continuously upgrade that skill. We also have a performance management system, so we're making some changes in that, because of some integration issues with our SAP. But we are. That's something that we're also working on quite intensively. It's taking some more time to upgrade that. But yeah, definitely, I mean, I totally understand what you're saying. We need to do that.
As far as the C-suite and the other stuff goes, I will say that, you know, in our business, unfortunately, at least at the coding and marking space, so and there's also one difference in the track and trace and the, you know, digital printing, but especially with the packaging machinery, where it happens at a higher level along the track and trace.
A lot of our business of, you know, frankly, for the date code and batch code printer and that sort of thing, it's not, you know, it's not like a CEO is concerned with what he's using, right? Like, or if I'm the CEO of Britannia, for example, I, I'm not really gonna be concerned about how I'm printing the date code and batch code.
So there are some people that are there, but it's not normally at a very extremely senior level who look at this. They are aware of what's happened, but then again, they're not that involved in the short-term decision making. But yes, what happens is, definitely there are many factories, many key production people, packaging development people and technical people, sometimes even purchase people, and we need to make sure that everyone is, you know, in sync, when they go for a solution of ours so that it's effective.
Okay, partner, thanks, for the response. Now, one another question that I had is, you know, when we are looking at, say, some of the emerging trends, like, now even pharma now is extensively now focusing on, you know, getting these barcodes done.
So now that is where I was coming from. It is, it is also now becoming an important, say, problem area for top leaders. Now, I understand that everybody may not get engaged at some levels, but, you know, given that, you know, you see news around, you know, spurious drugs and all those things, and adulterated food. So that's where I was coming from. It is now catching the attention of senior folks as well.
So maybe the seniority profile goes up, but I'm, I agree that it may not necessarily require, say, a Warren Buffett or, say, a an actual CEO to intervene in that. So that's where I was coming from, that the profile definitely goes up, if you bunch up or look at, say, a more bigger size of the pie.
So you are correct. But what I would say specifically when you're talking about pharmaceuticals, you're talking about spurious drugs and other things, those are done by a track and trace team. And then we have some high, you know, high strength anti-counterfeiting solutions integrated in that. So when I, when I say track and trace packaging machinery again, then we have to interact with senior teams.
But when I'm talking about just simple date code, batch code, type of application, MRP printing and so on, they, you know, it's not necessarily at that level. So when it becomes more for higher-end solution rather than just a piece of production equipment, then, you know, obviously the level changes of the interaction.
And just one, you know, request, you know, because, you know, I understand that we have already discussed this, but, you know, we are not really looking at guidance, but if you can outline some of the metrics, you know, where, like, a lot of initiatives are taking place, and I think you have patiently responded to them as well. There's the investment going on.
So, for example, if we just outline a number of large accounts, how we are defining our tier of accounts, how has been the movement? Say, now we had five large accounts, it is now ten, then what's the realization per account? So something that you can share in the presentation going forward. Then it also, you know, helps us, you know, tag along with you on that journey.
I understand that, you know, these are difficult backgrounds and some of the new initiatives that you are talking about, these are cutting edge, so even the industry will take time before they absorb it properly. And I understand, because I had a discussion with senior folks in pharma space, you know, they are looking at these solutions, but even they are not sure how to go ahead with that.
So that's where I was coming from, that if you can articulate or, you know, share some metrics also as of how we are trending on them. Not necessarily guidances. I understand guidances have a very different connotation in our investing world. So then, I think that would be really useful.
So definitely, maybe what we can do is we can check with a few customers, whether we can utilize their names. Normally, although we don't sign an NDA for each and everything, it is understood that, you know, all customers are confidential, especially when we're giving them, you know, our different solutions from the industry standard.
Maybe something we can talk about once the projects get completed. We also do track what we say closely as to, like, how many people are in what sort of revenue bucket, or how many are fifty lakhs plus in terms of annual revenue per year, or how many are between, you know, twenty and fifty, how many are in what level. So yeah, definitely, we're seeing an upgrade of levels in terms of the big accounts are increasing, but yeah, something we not disclosed.
I don't know if it's confidential. Something that we'll discuss internally. So I can't promise anything. But, Jay, if you can note this point down, we can-
Yeah, we can.
You know, something we can look at disclosing in the future.
So, yeah, we will try to expose something. Yeah, providing a, yeah, some kind of information that we in QTA.
Something very broad in nature.
Yeah, broadly, just a bunch of, just to look at the trend, you know? We're not looking at specifics here. Just to get the trend. Something that, you know, IT companies does all the time, right? These are our billion, million dollar accounts.
These are five hundred to one. This is the number, this is the contribution, this is how it has trended or, you know, something on that. From what I understand, you know, that confidentiality is of utmost importance, and we want you to maintain that. You know, that's a business hygiene. So, again, thanks and best wishes to the team. Thanks for patiently answering all our questions.
Thanks, thanks. Thank you.
Thank you very much.
Yeah.
The next question is from the line of Rohan Patel from Turtle Capital. Please go ahead.
Hello? Yeah.
Mr. Rohan Patel.
Yeah. Am I audible?
Yes.
Yeah, you are.
Yeah, yeah. I just wanted to understand what is your capacity utilization factor for Q2 as well as H1?
Yeah, we are around about 65% of the capacity utilization.
That stands for H1?
Yeah, for the coding and marking, yeah, H1. We are on the same thing, like about 63%-65% is what we look out for.
Okay. And, what I have seen in your presentation is that your overall capacity, that you mentioned is nine, more than nineteen thousand five hundred printers.
Yeah.
What you have guided is that you wanted to end the year with 2,700 to 2,800 printers. That comes out to be very low capacity utilization. Can you just help me understand?
Yeah, sure. Would you like to take this?
No, no, I understand. When we say it's 18,500 printers, I will get it.
No, we say the installed base is about nineteen and a half thousand.
The installed base.
Installed base.
Yeah.
Installed base.
In customers which are working, that's what's defined as the installed base, and then what we sell annually is 2,800. Now, out of the 18,500, I think that should be the working installed base, if I'm correct. So that 2,000 printers next to that base, so, you know, if we sell 2,800 printers, be 18,500 plus 2,800, we don't count upgrade printers in that. So, you know, printers will be upgraded or, you know, sort of refreshed, is not counted in that. But so it'll be like 18,500 plus 2,800 next year, so it'll be like 21,300, out of which maybe 500-700 will also go into a non-working base-
Correct.
Contribution to the base, something like that.
So, there is a fixed retirement plan as well. So, you know, some of the printers get retired as well.
Oh, okay. Okay. And I just wanted to, like, if you can give us a ballpark figure or some more of an understanding of how, at what rate we can grow over the next three to five years, like consolidated entity, given that you have made such an effort in subsidiaries as well as you are going to do that in standalone entities. So can, like, how, where would be Control Print, like, say, three year or four year down the line from current 360 crore top line to somewhere around 800, 900? Like, if you can give us just broad understanding of direction. If you can quantify, so.
So I think what we've said is that, you know, the standalone coding and marking business, you know, our core business, the market growth rate is about one and a half times GDP, that's about 10%-12%. And we said that we are confident that we can grow at the market rate or better. You know, and that's the only guidance we've given, unfortunately, you know, Rohan, so you have to make your own calculations beyond that about every other thing.
Okay. And, like, we can expect the current margins to be the base, and can we see the margin improvement from here on?
So again, like I said, there have been some margin improvements in my own calculations. It's partly that there have been some investments in, you know, some other business. I don't know if you were there in the earlier part of the call or not, but we've invested in some of our growth initiatives, both on a standalone basis and surely on a consolidated basis also. So I think it. As a result, some of the expenses of the employees and other expenses and some margins also look lower as a result. So I think if I look at our core coding business, it's going better.
But yeah, it's also being used to pull along certain other businesses which are not, you know, at that independent business profitability maturity stages yet. And right now, yeah, that's what the situation is. So on a consolidated basis, it's very difficult to understand or to predict anything, because, you know, the other three businesses are still relatively young. And like I said, we are expecting the things. We believe things are going relatively well.
And, you know, in some time, you know, which was my thing was, like, within six months out of that two-year period, that we said that, "Hey, we need two years to get back to investors with some sort of a clear picture ahead." So I know that that's not the answer that anyone wants, but, you know, that's the situation that's there right now. You know, but obviously, we are working towards something better.
Okay. That was from my side.
Thank you. Thank you.
Thank you very much. Our next question is from the line of Ralph Kruger from Arcstone Capital. Please go ahead.
Hi, thanks for taking my call. I regarding the packaging machine, market and your expectations for that, again, I know that it, this is, just the original or the initial, foray into the area, but are you, thinking... Well, when you're thinking about the packaging market and the addressable market, I have a few questions. One is, you have patent protections on both machines and the sachets. And the first question is: Are you comfortable with the degree of protection that you have from possible competition with those two, protection, patent, areas? That's the first one. Second thing is, is,
Don't forget the first question. Is that okay?
Okay.
Can we do it this way?
Yeah.
Yeah. So now, looking at the patent, because you asked a very specific question, we have about four core patents around the technology of the packaging machinery. You cannot patent a material theoretically, you cannot patent structure. That's the way the patent rules work. What we have is that, a patent on the machinery and the way the machinery is used. So what we've done is we've put a RFID, like, we've locked our machine.
This is the first thing we did with, after we purchased this customer, you know, like, when we started CPL Italy, we purchased the intellectual property in CPL Italy. The first thing we've done is we've implemented a sort of protection, similar to what we do in our ink business. I don't know if you're aware that, you know, we lock our printers and our cartridges.
So there is a lock, and technically we're entitled to do that because it's a patented machine of ours. So, you know, obviously, you know, we cannot patent the structure. So we cannot patent the structure of the material. Obviously, there are some very specifics that go in that material or they won't work in the machine. So I want to be very clear, there's also a technical bar out here.
But what's happening is that we have some four key patents around the machine, and, we're very clear to the customer that we have Tetra Pak style, so to say, you know, lock the machine with our... How should we put it? Like, with our, with our RFID. So if they purchase the machine, they will also purchase the packaging material at a predefined cost from us.
So that's the model that's there. It is a Tetra Pak type model. The patents, I can tell you are key, I mean, primarily around the machine, because certain types of packaging structures are not allowed to be patented, in terms of, you know, just a structure.
Okay. Good, but-
Yeah, there's a lot. As a, as an investor, if you buy the machine, you could buy the materials from us. There's no way to get around that.
Right. Okay, good. Which is very similar to your coding and marking machines as well.
We use some of the same technology out there. Similar RFID implementation is there, so every time you buy a roll, it comes with an RFID tag, which is embedded, and it gives you a certain amount of credit.
Okay. All right. So, now that, I mean, you've decided to purchase V-Shapes, I assume that the margins on the machines and the margins on the packaging material are gonna be somewhat higher than your core business.
No, the gross margins in packaging materials are definitely lower. The gross margins in the machines are good. They're similar to our existing overall gross margins. But the net margins are, in that business, is pretty good because the cost... So each person ends up, or you know, each, the amount of revenue that you drive, in terms of the SG&A, is significantly lower as a percentage of sales.
So on an overall operating basis, assuming the business scales up, then, you know, it would, yeah, be both at a similar level to coding and marking. You know, and coding and marking is actually higher than what it seems. But yeah, so but the gross margins will be lower, the net margins will be same or higher.
Okay, just let me repeat what you said to see if I get it. So you're saying that the machine profitability, the margins on the machines will be higher. However, the packaging material will be somewhat lower, possibly, and net-net, you're gonna have the same or possibly a little higher margins for the entire packaging business?
Yeah, as compared to the existing coding and marking business, yes.
Great.
So on an overall basis, we would expect the net margins to be similar, at least. We would expect the gross margins, for the machines to be the same or higher. We would expect the gross margins for the materials to be lower, and that's because obviously everyone's very conscious of the cost of the packaging material, because in the end, that's a, you know, a critical decision-making aspect. So we don't want to price ourselves out of the market.
Of course, I can tell you for certain people, like pharmaceutical companies and so on, the margins might be quite high in those types of cases, because they have certain structures which require more complexity and, you know, then you can charge more. But, you know, when we started getting to the volume markets like food and cosmetics, then the margins will definitely not be that high.... Yes, so like, you know, that's-
Okay.
Yes, I think your understanding is correct, right there.
Okay. Right. So, to further this thought, you know, the coding machine is at the end of the assembly line, and it amounts to a very small percentage of the cost of going through the entire assembly line for the product or whatever you're coding at the end of the production. However, when you're doing the packaging, that is a much higher relative cost. And to your point, you have to be careful how you, you know, price it, so you don't price yourself out of the market because it's a much larger piece of the production than you're used to in the coding and marking. Correct?
That's absolutely correct.
Okay. All right. So, all right, so now, the V-Shapes, I just wanna be-
So when we talk about the market, of course, what we are doing is we're competing against other single-use technologies. So it could be significantly more expensive technologies, like single-use glass jars or containers or tubes. It could be things which are more expensive than what our packaging is, which could be something like a thermoform. So even something like a thermoform would be technically more expensive on a per piece basis, depending on the type of package, depending on the combination of materials we are using.
The moment we go to an aluminum barrier, of course, material is gonna be significantly more expensive. And then if you go to a sachet, you know, compared to a mono-dose solution, then the sachet will be cheaper on a per package basis. And of course, these are some of the single-use technologies, but there are others.
But just to give you an idea, so what's happening is, it depends obviously on each. What I'm saying, if you are making Heinz ketchup, you're gonna be very conscious of, you know, the cost. And if you're making some sort of expensive serum, you know, in cosmetics or some sort of pharmaceutical product, you might not be that conscious of the cost for that. But you get what I'm saying? Like, the high volume guys will be more conscious.
Okay. So last question is, so when I'm thinking about V-Shapes. The first thought I had was, it's a natural product for the lower income countries because people buy much smaller quantities, single use usage at the very, very low end of the quantity than higher income countries. However, the second thought I had was, that if you're using a very expensive product, maybe an expensive cosmetic, the V-Shapes might be marketed in a higher income country, similarly, as it would be in a lower income country for a basic soap or Persil hand cleaner. Is that correct thinking, or am I off?
Right now, the restriction on us, to be honest, is mainly that our sales and marketing effort is quite pathetic, to be honest, which is obviously one of the things I'm building out.
Yeah.
So the main limitation is that we've not reached 99.73% of the market, frankly, or whatever, something like that. So the awareness of the solution, you know, the comparison with the existing single-use solutions, is not in place. And of course, there are many things which, you know, could work out. So even if you have something like honey or something, now you've got it in a glass bottle or a cough syrup. Now, I don't know how many you use it, but, you know, every time you open it, there's, like, half the honey or half the cough syrup which runs down the side. Or if you use something like black bean paste.
So you can even convert something like that into a single use or a miso paste, because, you know, some people will not cook the entire two hundred grams, and they may only need fifteen grams for a single portion. And there's no point me buying a huge bottle of something if I don't need it. There are, of course, many combinations here.
There are many people who are interested, for example, right now, in certain things like serums, because they might have a 30 ml glass bottle of serum. The first thing is, when I open the bottle, the barrier, you know, the... It's obviously exposed to the air. So even if it's packed in glass, which is, you know, a beautiful container, it's very inert.
The moment I open it, it's exposed to the air, so it's lost its barrier properties, which means a lot of these serums start losing a lot of efficiency very fast because of the oxidization. And that means you have to add a whole bunch more chemicals, some of which customers don't like, to protect it against that.
Yeah.
But then there's no easy way to have a, you know, a 1 mL dispensing. So suppose I've got a, just for example, INR 2,000 serum. It might make more sense that I pack in 30 individual use packs for our, from our side, you know, and charge INR 70 per pack, and that might be better and more practical for the customer, rather than one INR 2,000 bottle. So even those types of situations can happen. But what we are seeing is, you know, there's...
So far, we've been focusing more on the pharmaceutical market and the OTC, because, you know, we are still getting all our materials from Italy. They're quite expensive, and as a result, we were then focusing on the high margin customers who pay us quite a lot of money. Now, we're also working on some...
And the second problem we're having is that the pharmaceutical customers have no restriction on what material they use, so they can afford to go for non-recyclable packages. In the food and cosmetics industry, the feedback has been quite clear, that unless there's no choice, they will not go for a non-recyclable package going forward.
So we have developed a recyclable package, and we're in the process of scaling it up. It's also gonna be significantly cheaper with a high barrier, and that's something we're also looking at making ourselves locally in India. So that's something which we feel will get the cost down by almost like 40-50% from where it is right now, and really help us get into that cosmetic and especially the food sector, where the volumes could be significantly higher.
So right now, the two bottlenecks are the cost per piece, and the second is the non-recyclability. It's something I want to be quite transparent about. And the pharmaceutical and those types of customers don't have any restrictions. In fact, they don't really care what happens. They want an aluminum barrier in there, somewhat made.
But the food and the cosmetic sector is very sensitized as of right now, and they definitely in their new packaging, I mean, I don't know how true it is, but they definitely seem like recyclability or fully recyclable options are must. So we have developed a solution. There was a lot of fine-tuning involved. It's ready now, and it's being tested, and that's something we are working on now, scaling up in a big way.
Okay, sorry. One last question is,
Mr. Ross, sorry to interrupt.
Yeah.
but due to-
That's fine. I'll go back.
Time constraint, we will have to take that as the last question.
Thank you very much. Appreciate it. I will take this call. Last question. Please go, Mr. Ralph.
Okay. So, sorry. Are you anticipating... Well, no, sorry. Let me ask one last question. When... At what point would you be disappointed if you-- At what time frame would you be disappointed if you didn't sell one machine?
I think I would be very disappointed if I didn't sell one machine. So, I can't comment right now on the existing pipeline. We have an existing pipeline. We might have sold machines or we might have some existing prospects. I might can't disclose this to you, maybe towards the end of the year. But, you know, like I said, each machine, if we sell a machine, it's gonna take six months before we can execute it, because I need to do a whole bunch of packaging tests.
Yep.
To validate the material, to validate the aging test, and in the pharmaceutical environment, there's a six-month aging that takes place, so you know, in the food and the cosmetic sector, we can do an accelerated aging accepted, but for the pharmaceutical, they're required to create that information, and for that, we need to store the materials for six months and test them again, and test them again, so that they have it for their dossier, and then only can they use it on their packaging, so even on the OTC product, if it's sold under the doctor's prescription, the same rules apply.
Okay. All right. Thank you very much for taking my last question. I appreciate it. Good luck.
Thanks, guys.
Thank you. Thank you.
Thank you very much. I now hand the conference over to the management for closing comments.
Thank you, everybody, for joining the call, and wish you and your families a happy Diwali.
And absolutely the same, you know, happy Diwali to everyone. Thanks for taking the time out. It's really appreciated from our side. I think a lot of great questions. I understand that there's some short-term concerns, but like I said, we're still comfortable mentally, and we feel the opportunities are large. And we will definitely keep people posted during this journey if we feel anything adverse happens. And hopefully we'll try to give some good, great pointers also pointed by, I don't know, there's Mr. Saket and.
Yeah, surely, surely.
Other people, and we'll definitely try to incorporate some of those suggestions internally. We don't like to sometimes disclose too much, but we will get back to everyone and see to the maximum level if we can improve the amount we disclose.
Yeah.
Thank you, everyone.
Thank you. Bye-bye.
Thank you very much. On behalf of Asian Markets Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you. Bye-bye.
Thank you, sir.
Thank you. Thanks, Karan. Thank you, everyone. Bye.
Thank you.